FIH Mobile of Hong Kong, a unit within the Foxconn group has decided to write off the remaining $40 million of its $200 million investment in Indian ecommerce company Snapdeal. Jasper Infotech, the parent company that owns Snapdeal had received funding from different sources in its heydays, including $200 million from FIH Mobile.
However, after the attempts to merge Snapdeal with Flipkart failed, it has been a downward spiral for the ecommerce marketplace and investors like FIH Mobile have concluded that it is more prudent to forget the investment as a loss in their books and move on. The accounting term for this is impairment loss, meaning even if there are any possible future earnings from the investment, it would be negligible when compared to the cost of holding on to the investment.
The bulk portion of $160 million was already written off earlier. This brings the involvement of Foxconn in Snapdeal as an investor to a close as on December 31, 2017.
Much of the reason for the poor showing of Snapdeal and its value as an investment for companies like FIH Mobile is being attributed to the failure of the talks to have the company merged with Flipkart. It is reported that while the major investors like SoftBank were keen on the deal, the minority shareholders did not agree and the talks had to be called off. There were also reports of an issue with regard to the taxation element if such merger were to take place because Flipkart is registered in Singapore and Snapdeal in India.
However, after months of negotiations, Snapdeal decided to continue independently with a new direction, which the founders called Snapdeal 2.0
From a high of being valued at $4 -$5 billion, it has only seen bad days in the past year or more. With Amazon and Flipkart dominating the market, Snapdeal has been relegated to being just a ‘me too’ player.